The payments system supports trade and commerce in a market economy. Notes and coin are one means of payment. Liquid balances held at financial institutions are also available potentially for transactions needs, under cheque and other forms of transfer facilities, and thus add to the money supply.

From 1 July 1998, a new financial regulatory framework came into effect, in response to the recommendations of the Financial System Inquiry. Under these arrangements the Reserve Bank has stronger regulatory powers in the payments system in accordance with the Payments Systems (Regulations) Act 1998 (Cwlth), to be exercised by a Payments System Board within the Bank.

Money

Australia has a decimal system of currency, the unit being the dollar, which is divided into 100 cents. Australian notes are issued in the denominations of $5, $10, $20, $50 and $100 and coins in the denominations of 5c, 10c, 20c, 50c, $1 and $2. $1 and $2 notes were replaced by coins in 1984 and 1988 respectively, and 1c and 2c coins ceased to be issued from 1 February 1992. Table 27.30 shows the value of notes on issue on the last Wednesday in June. Table 27.31 shows the value of coin on issue at the same time points. More recent information may be found on the Reserve Bank of Australia website (<http://www.rba.gov.au/CurrencyNotes/>).

27.30 VALUE OF AUSTRALIAN NOTES ON ISSUE - Last Wednesday in June

2004

2005

2006

$m

$m

$m

$5

533

539

572

$10

791

837

857

$20

2 533

2 584

2 690

$50

15 941

16 740

18 044

$100

14 224

14 924

15 903

Total

34 022

35 624

38 066

Source: Reserve Bank of Australia.

Note: $2 notes on issue have been written off by the Reserve Bank of Australia.

27.31 VALUE OF AUSTRALIAN DECIMAL COIN ON ISSUE - Last Wednesday in June

2004

2005

2006

$m

$m

$m

1c

22

22

22

2c

29

29

29

5c

154

163

174

10c

147

158

171

20c

210

226

245

50c

302

319

340

$1

531

557

576

$2

832

893

962

Total

2 227

2 368

2 518

Source: Reserve Bank of Australia.

Money supply measures

The money supply, as measured and published by the Reserve Bank, refers to the amount of cash held by the public plus deposits with specified financial institutions. The measures range from the narrowest category, money base, through to the widest category, broad money, with other measures in between. The measures mainly used are as follows:

Money base - comprises holdings of notes and coin by the private sector, deposits of banks with the Reserve Bank, and other Reserve Bank liabilities to the private sector.

Broad money - is defined as M3 plus borrowings from the private sector by non-bank financial intermediaries (including cash management trusts) less their holdings of currency and bank deposits.

The money supply under each of these measures at 30 June is shown in table 27.32.

27.32 MONEY SUPPLY MEASURES - 30 June

2005

2006

2007

$m

$m

$m

Money base

38 678

41 278

43 735

M3

678 360

747 280

867 883

Broad money

764 467

841 183

961 046

Source: Reserve Bank of Australia.

Payments system

Following recommendations by the Financial System Inquiry, the Payments System Board was established within the Reserve Bank in July 1998. The Payments System Board has responsibility for determining the Reserve Bank’s payments system policy, under the powers set out under the Payment Systems (Regulation) Act 1998 (Cwlth) and the Payment Systems and Netting Act 1998 (Cwlth). The Reserve Bank also has responsibility for oversight of the stability of clearing and settlement facilities under the Corporations Act 2001 (Cwlth).

The payments system in Australia has changed significantly in recent years. In part, this has been a response to technological change and consumer behaviour. On average, there are at least 13 million non-cash payments made in Australia each day, the overwhelming majority of which are electronic payments.

Cheques account for 11% of the number of non-cash payments, 52% are debit and credit card payments, with the remaining 37% made up by direct debits and credits.

Table 27.33 shows the number of points of access to the payments system. Branches are access points staffed by employees of financial institutions. Agencies are staffed by other than employees of financial institutions such as postmasters or storekeepers, and exclude school agencies and Bank@Post agencies. Bank@Post (previously called giroPost) provides a limited range of services at Australia Post offices on behalf of participating financial institutions. Electronic points of access include ATM and electronic funds transfer at point of sale (EFTPOS) terminals. More recent information may be found on the Australian Prudential Regulation Authority website
(<http://www.apra.gov.au/Statistics/Points-of-Presence.cfm>).

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